Vittorio Colao, Chief Executive, commented:
“Our emerging market businesses are growing strongly, supported by consistent execution and accelerating demand for data. In Europe, conditions are still difficult, and we continue to mitigate these challenges through on-going improvements to our operating model and cost efficiency. In addition, the shift to 4G is gaining momentum and we have seen improving mobile customer net addition trends. We are therefore optimistic that our revenue performance will begin to improve as regulatory headwinds ease and customer appetite for video and content services increases.

“During the quarter we have made further progress in executing our long-term strategy. Project Spring, our £7 billion organic investment programme, will accelerate our plans to establish stronger network and service differentiation for our customers, with the first elements of the programme already initiated. After the imminent completion of the Verizon Wireless transaction, we will be very attractively positioned, with a strong balance sheet, improved dividend cover and the financial and strategic flexibility to make further investments in the business or returns to shareholders in the future.”

Group overview
Group revenue for the quarter declined 3.6% to £11.0 billion, including a 2.1 percentage point impact from adverse foreign exchange movements and a 2.8 percentage point positive impact from M&A and other activity. On an organic basis, Group service revenue decreased 4.8% or 2.4% excluding the impact of mobile termination rate (‘MTR’) cuts. Emerging markets continued to generate strong organic growth supported by rapidly increasing mobile internet users and data usage. The environment in Europe remains challenging and we have continued to experience intense macroeconomic, regulatory and competitive pressures in the quarter.

Our new organisational reporting structure is now effective, with Northern and Central Europe and Southern Europe merged into one Europe region. Vodafone Turkey is now reported within the AMAP region.

In Europe organic service revenue fell 9.6% in the quarter, or 7.0% excluding the impact of MTR cuts. Performance across the region remained under pressure mainly due to continued price competition. In Germany service revenue declined 7.9%, reflecting strong price competition in both consumer and enterprise. However, increased customer investment in the quarter resulted in improved customer additions. UK service revenue declined 5.1% due to price competition, particularly in prepaid and enterprise. Good progress has been made on 4G, with over 370,000 customers on 4G plans since launch in August. In Italy, service revenue declined 16.6% driven by further macroeconomic weakness and aggressive price competition. Price competition in the prepaid market became less intense following the conclusion of the summer promotional period. Spanish service revenue fell 14.1%, an improvement from the previous quarter, driven by increased contract and fixed broadband net additions, supported by our convergent offer.

Organic service revenue in AMAP grew 5.5% in the quarter, with continued strong revenue growth across the majority of our markets. In India service revenue grew 13.2% driven by a higher customer base, improved voice pricing and strong data growth. Mobile internet users in India increased 38% in the quarter to 45.7 million and data usage continues to grow strongly with 3G usage now averaging in excess of 700MB per month. Vodacom Group service revenue grew 3.5%, with South African service revenue growth improving to 0.6% following a successful summer campaign. Service revenue in the Vodacom International businesses grew 15.1%. Vodafone Turkey continued to grow strongly at 3.9% or 11.0% excluding voice and SMS MTR cuts. Our joint venture in Australia reported a service revenue decline of 8.0%. However, network performance and customer satisfaction have improved strongly in recent months. In Egypt service revenue grew 1.1%, improving from the previous quarter’s 0.8% decline, as customer usage trends improved following the removal of the curfews.

Free cash flow of £1.0 billion in the quarter was £0.2 billion lower year-on-year due principally to increased capital expenditure.
Net debt including joint ventures was £31.5 billion, an increase of £5.8 billion in the quarter following the acquisition of 76.6% of KDG for £7.0 billion including acquired debt. Net debt excluding joint ventures was £29.8 billion.

Capital expenditure of £1.8 billion was £0.3 billion higher than the prior year due to the accelerated phasing of investment. Incremental investment for Project Spring of £0.5 billion is expected within the current financial year, with the cash outflow taking place in the 2015 financial year.

We have continued to make progress with our Vodafone 2015 strategy. 9.8 million customers are now on Vodafone Red plans, and we remain on track to meet our upgraded target of 11-12 million customers by March 2014. Mobile in-bundle revenue has grown 6.6% in the quarter and now represents 49% of Group mobile service revenue, and 59% in Europe. Our 4G services are now available in 13 countries and we now have around 2 million 4G Red customers in Europe. Data consumption has increased significantly, with customers using on average double the amount of a 3G plan. Group data usage grew 64% year-on-year, with Europe up 44%, and AMAP up 110%.

Our daily roaming proposition now has 10.9 million registered customers, accounting for more than 20% of consumer contract and 15% of enterprise roaming customers. We have successfully launched our fully integrated payment services, mWallet and Smartpass, in Germany and Spain and expect to rollout to the UK, Italy and the Netherlands by the end of the year.

Vodafone Global Enterprise, which serves our biggest multi-national accounts, grew 4.5%. We won several new contracts including Premier Foods for a fully integrated communications platform. In machine-to-machine (‘M2M’) revenue grew 30% and we continued to maintain our market leading position having been ranked number one5 again for M2M excellence. The integration of both Cable and Wireless Worldwide (‘CWW’) and TelstraClear remain ahead of our business plans.

The New IP is actually bigger even than business. Like another hugely important tech that Light Reading is digging into right now, the New IP has the potential to change the world by fundamentally advancing what it is possible for people to achieve with communications.

Mobile broadband is changing our lives. It's reshaping the Internet, industry, and society. It allows us to freely connect with one another anytime, anywhere. At this year's Mobile World Congress, Huawei will share its latest insights and newest ideas and technologies that will shape the future of MBB. They will showcase their end-to-end MBB solutions that will ...

A new digital revolution is leading us to a better connected world. Together with millions of digital partners, Huawei will help CSPs to build their digital service ecosystem and aggregate a wide variety of digital services. In this video, we find out how Huawei is going to help CSPs implement digital operations.

This year's Big Telecom Event (BTE) in Chicago is going to provide more opportunities than ever for networking, getting to grips with key industry challenges and opportunities and, equally as important, having some fun.

On Sunday March 1, 2015, Light Reading will host an ICT Leaders Roundtable in partnership with Huawei. At this half-day event, CIOs, analysts and researchers will discuss key industry trends like virtualization in the cloud with a specific focus on new business models. Located at the luxurious Renaissance Hotel near the Fira Barcelona, space is limited so please ...

In December 2014, Light Reading gathered telecom executives in Reykjavik, Iceland to discuss their vision for high-capacity networks through the end of the decade. The intimate, interactive meeting was set against the backdrop of Iceland's spectacular natural beauty. As one of the event's founding sponsors, Brocade's Kelly Herrell shared his company's strategy at ...

In December 2014, Steve Saunders sat down with Brocade VP of Software Networking Kelly Herrell at Light Reading's 2020 Vision executive summit in Reykjavik, Iceland. They spoke about Brocade's approach to the New IP, the future of the telecom industry, and more.

Mobile broadband is changing our lives. It's reshaping the Internet, industry, and society. It allows us to freely connect with one another anytime, anywhere. At this year's Mobile World Congress, Huawei will share its latest insights and newest ideas and technologies that will shape the future of MBB. They will showcase their end-to-end MBB solutions that will ...

A new digital revolution is leading us to a better connected world. Together with millions of digital partners, Huawei will help CSPs to build their digital service ecosystem and aggregate a wide variety of digital services. In this video, we find out how Huawei is going to help CSPs implement digital operations.

In the digital age, network experience has become the primary productivity especially for telecom operators. In this video, Wenshuan Dang, Huawei’s Chief Network Architect, discusses how carriers can tackle the challenge of infrastructure complexity in order to enhance business agility and improve user experience.

What's making policy control strategic in 2015 and beyond? Amdocs talks with Heavy Reading's Graham Finnie about the key factors driving change in the data services landscape. Find out what his policy management research reveals about the road ahead for policy control – and sign up for

Check out Light Reading's interview with Jay Samit, the newly appointed CEO of publicly traded SeaChange International Inc. With a resume that includes Sony, EMI, and Universal, Samit brings a reputation as an entrepreneur and a disruptor to his new role at the video solutions company. Hear what he had to say about the opportunities in video, as well as the outlook for cable, telco, OTT and mobile service providers.